How To Buy Happiness

While I was driving home from my appointment I couldn’t help but feel nervous that I would forget to do something: peel the price tag off a thing I just bought in case somebody saw how much it cost.

I pulled onto a sidestreet and grabbed the plastic bag from the back seat. In it was a puck-sized container of a high-end hair paste. I scratched the little white sticker off. It was $35.00, and now only I knew.

Some paranoid financial conditioning somewhere in my head had me thinking it had been an extravagant purchase. But I thought about it for a minute and realized that no, for what it does for me, it’s some of the best value I’ll ever get for thirty-five bucks.

I’m 31 years old and it wasn’t until I started going to a well-reputed salon and buying 35-dollar hair paste that I finally began to really like my hair. This was a year ago. My mop had always been a point of self-consciousness for me. I liked myself, but never got along with my hair. It had evolved over the years, from crunchy gel spikes to a #2 buzz cut to a polite crop, but it was always a liability. I felt faintly uneasy about it, all the time. That problem spread itself across many thousands of days of my life, taking a little (sometimes a lot) of enjoyability from each of them.

Thinking back, I can’t even guess how many completely useless 35-dollar purchases I’ve made in my life — shirts I never wore, books I never read, drinks I didn’t need to drink, restaurant meals I could have made myself. When I consider what it really does for me, this hair paste is an astoundingly good investment.

One container lasts about six months, and every day of those six months I feel good leaving the house, when it used to be normal to feel self conscious. That alone — the sensation of liking the way my head looks — is worth vastly more than the 15 cents a day it costs me. And that’s to say nothing of the endless secondary effects of that very inexpensive confidence: smoother socialization, better posture, more attention from women, a more easygoing mood, and all the tertiary effects that arise from those improvements, and so on.

Considering the real-world value it delivers to my life, this stupidly expensive hair paste is one of the most worthwhile purchases I’ve ever made.

All purchases are investments

This is a pile of most of the receipts from the last three months of 2011. It represents thousands of dollars of retail purchases. Each slip is a date-stamped record of how much money I decided to part with there and then, and what products and services I got in return. Thirty dollars here, fifty dollars there — and there are fistfuls.

I can look at most and quickly identify the things that are no longer contributing any value to my life: magazines I bought at the airport because they were slightly more appealing in the moment than reading the book I already had with me, desserts I bought with my groceries because I went shopping while hungry, unhealthy lunches I bought because I’d rather sleep twenty more minutes than make something to take to work, and dozens and dozens of elaborate espresso beverages that gave me nothing more than a ten-minute dopamine hit for five dollars a pop.

Each line item on those slips represent an investment. For each, I parted with money in the hopes that what I got in return would add something to my life, in the form of nourishment, ability, pleasure, or any other quality that improves my days. Some were good, lots were bad.

When it comes to our money, we tend to differentiate between consumer purchases, and investments as if they’re functionally different. But they work the same. As long as there has been wealth, people have tried to grow wealth by investing. We put value into something with the idea that it will return greater value to us over time.

When we’re talking about normal capital investments, getting a 10% return on investment is traditionally the “fantastic” benchmark. Putting 100 units of value into something, and getting 110 back over a year is definitely a success.

That’s not the area where we have the most leverage over our finances though. When it comes to our consumer purchases we can do way better than getting an extra 10% worth of value out of our money.

All you can buy is quality of life

Making more cash with your cash is the idea of financial investments, but we’re talking gains of a few percent over what you already had.

By comparison, when it comes to consumer purchasing, the value of what you do trade a dollar for can vary tremendously. Fifty per cent. Two hundred per cent. Five thousand per cent. Between the different ways you can spend twenty bucks, there is a comparatively astronomical range of possible return on investment.

And that’s because the value those purchases return isn’t monetary value, it’s experiences.

I have a twenty dollar bill. I can spend it on a few lattés, which adds to my life a only a few minutes of actual sipping pleasure, and maybe an hour of the mild feeling of security that comes with having another sip waiting for me in my hand.

That twenty dollars, spent that way, returns little else in terms of real value and also comes with some liabilities in the form of empty calories and coffee breath. The net value is less than zero. I have nothing to show for it an hour later except the needless calories in my body. Terrible investment.

I could have spent that same twenty dollars on two yoga classes, and gotten real, lasting value out of it — the type of value that builds more value indefinitely.

Just the classes themselves are reliable oases of calmness, and come with a rare sense of assuredness that I’m not wasting my time or being indulgent. But the bulk of the value comes in dividends in the days between and after the classes. I walk around with better posture. I’m slightly fitter and more inclined to do more exercise. Fewer moments that week are spent lost in thought. I get that mild post-exertion muscle soreness that I like so much. I get a persistent feeling of optimism that can be felt in many of the hours between and around the classes. Good investment!

We just have to remember that it’s not the money that has value. Money has no value except what you can trade it for. Most of the time we’re trading our money for things — objects such as cars, shoes and microwaves. Most of the rest of it is exchanged for services — bus rides, massages, carpet cleaning. But we purchase those goods and services only for the experiences they can lend us — or spare us.

Value amounts to positive experiences. Wealth is ultimately the capacity to create worthwhile experiences in life, and to prevent bad experiences. There’s nothing of value except experiences, and assets that can continue to supply good experiences. That’s all money is good for.

If you can stay conscious of what the real-life value of your purchase really is, in terms of the experience it offers, then you can find enormous leverage in what investments you make. That’s where we can really profit, if we recognize that wealth is not actually money, it’s capacity for quality of life.

What really pays off depends on the person, but you can get a huge amount of mileage out of simply stopping to look at what form of value you’re actually getting. All of it is going to amount to feelings anyway, but what feelings, and how long do they last, and are they going to create conditions that help to make more in the future?

There’s way more to be gained by finding leverage in the kinds of experiences you spend your money on than there is in trying to increase your income, or trying to maximize your financial return on investment.

You can shop around all day trying to make 3 per cent on your savings instead of 2.75, and then go eat a forgettable meal at Applebee’s just because it’s Friday, and obliterate a year’s worth of gains.

It’s the same mentality shared by the people who drive across town to the gas station that’s selling fuel a few cents cheaper. They don’t know where the value lies. They react to numbers.

Lessons from chocolate

For most of us middle-classers, our greatest financial leverage is not in what mutual funds we buy, but in how we gauge the real-life value of our consumer purchases. You can multiply what you get out of your discretionary income by asking: what form does this value come in, in terms of experiences? How long does it last? Will it leave me with some kind of value-producing asset, such as a skill or a tool?

The cost of something is not limited to the amount of money you forfeit for it. Purchases often come with negative total value. Yesterday while at the grocery store I had a lapse, and threw a large bar of dark chocolate into my basket.

I am eating it as I write this, and I’m excited for it to be gone so I don’t have to look at it any more. It’s really not that great. I don’t feel good right now.

The best part was the first two bites, which in terms of actual value only yields about fifteen seconds of pretty modest pleasure. But it’s here, and I don’t really feel like putting it back in the fridge.

The moment when I was in the chocolate aisle deciding which flavor to grab — that was a moment where I wielded a great amount of leverage, if only over a small amount of money. All I need to make far better investments in future scenarios like it is to stay rational when I feel urges to buy chocolate. I need to realistically assess the value of what experiences I’m actually buying.

I won’t argue with what chocolate adds to your life — some people swear some of their finest moments come while experiencing chocolate, but I know for me it’s a really terrible investment.

The net value is less than zero. I’m a little bit fatter, all its positive value is gone and I’m left with the liabilities. I would have gotten more net value out of throwing a two-dollar coin in the river than I did by eating a giant mid-quality chocolate bar by myself.

Don’t wait until you’re in front of the chocolate to make these assessments. Look through some receipts. What was the real-life value there? What form is it in? What remains of it? Would you rather give that value back, and have the cash in hand again? What liabilities does it come with?

You might think you already do this kind of evaluation, but it’s unlikely. We buy things for all kinds of reasons, and it’s usually quite unconscious. You put something on the grocery list because you’re used to having it and you’re out of it. Then you buy it because it’s on the list. The cycle renews itself without your ever considering what you’re actually adding to your life for that money.

Right beside my laptop, there are several fistfuls of receipts. A single wad of those receipts, which we tend to think of as near-garbage, probably represents the expenditure of a similarly-sized wad of cash, in twenties and fifties.

All that money is gone, and I hope my life still contains something to show for it. But most of it is probably gone without a trace. That’s good news though, because I know the next wad will leave a lot more behind — if I remember that all we can ever really buy is quality of life.